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Loss Leader Business Strategy

Loss leader business strategy is a product pricing model, which aim at getting new customers by offering products for low or no profit, some times with a loss. Many businesses have implemented this strategy successfully. Loss leader strategy is considered a good strategy for building a brand image within customers, and it works especially well for news businesses.

Loss leader pricing model works when 1) you have to market a related product for high profit, 2) you want to build a public image of a competitive company, 3) you want to outrun your competition, 4) you want to sell out your products quickly – especially the product is becoming outdated, 5) you target a broad sector of customers and 6) when your company is in rapid growth phase with enough financial backup.

But loss leader strategy is not so problem-free. You are dealing with money and consistently selling your product and services for lower cost can destroy your company’s future. You could implement this strategy with proper goals, planning and financial backup. Make them only short-term practices for specific occasions. Your competitors will also have similar plans, so be cautious.

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